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Alabama Department of Revenue - Tax Incentives - Tax Abatements Act

Property Tax & Sales Tax Abatements

TAX INCENTIVE REFORM ACT OF 1992 ABATEMENTS

SUMMARY

The Tax Incentive Reform Act of 1992 (Chapter 9B, Title 40, Code of Alabama 1975) gives cities, counties, and public industrial authorities the ability to abate the following:

  • State sales and use taxes;
  • Non-educational county and city sales and use taxes;
  • Non-educational state, county, and city property taxes - up to 10 years (except data processing centers – see section below regarding data processing centers);
  • Mortgage and recording taxes.

To receive an abatement for any or all of these taxes, a project must meet certain qualifications and follow certain procedures, as determined by law and regulation.

Data Processing Centers:

  • The maximum abatement period is 10 years from and after the date the private use property becomes owned for federal income tax purposes for projects that invest up to $200M within 10 years from the commencement of the project.
  • The maximum abatement period is 20 years from and after the date the private use property becomes owned for federal income tax purposes for projects that invest over $200M but less than $400M within 10 years from the commencement of the project.
  • The maximum abatement period is 30 years from and after the date the private use property becomes owned for federal income tax purposes for projects that invest over $200M within 10 years from the commencement of the project and exceed $400M within 20 years from the commencement of the project.

In addition, data processing centers are eligible for abatement of state and non-educational local sales and use taxes associated with constructing and equipping a project for an extended time period contingent upon the above.

STATUTORY REQUIREMENTS FOR ABATEMENTS
Business Activity Requirement:

  • Industrial or Research Enterprise - Any trade or business in the 2007 North American Industrial Classification System (NAICS), promulgated by the Executive Office of the President of the United States, Office of Management and Budget as:
    • Sectors 31 (except National Industry 311811), 32, and 33 (manufacturing); 
    • Subsector 423 and 424 (merchant wholesalers, goods);
    • 493 (warehousing activity projects that provide logistics services related to the distribution of goods, where at least 50 new jobs are created),
    • 511 (publishing industries (except internet))
    • 927 (space research and technology);
    • Industry group 2121 (coal mining);
    • Industry Group 5417 (scientific research and development services);
    • 5415 (computer systems design and related services);  
    • 5182 (data processing, hosting, and related services);
    • Industry 11331 (logging);
    • 48691 (pipeline transportation of refined petroleum products)
    • National Industry 115111 (cotton ginning);
    • 517110 (wired telecommunications carriers);
    • 541380 ( testing laboratories);
    • 561422 (in bound call centers only);
  • Any process or treatment facility which recycles, reclaims, or converts materials, which include solids, liquids, or gases, to a reusable product.
  • Headquarters facilities as defined in NAICS 551114 (where at least 50 new jobs are created);
  • Data Processing Centers (where at least 20 new jobs are created and average annual total compensation is at least $40,000).
  • Renewable energy facilities;
  • Research & development facilities;
  • Tourism destination attractions;
  • Projects owned by utilities that produce electricity from alternative energy resources;
  • Projects owned by utilities that produce electricity from hydropower production.
  • Subsector 493 (warehousing and storage), Industry Number 488310 (port and harbor operations), or Industry Number 488320 (marine cargo handling), when such trade or business is conducted on premises in which the Alabama State Port Authority has an ownership and are used as part of the operations of the Alabama State Port Authority.
  • Any underground natural gas storage facility which is located in the Gulf Opportunity Zone, developed from existing geologic reservoirs

CAPITAL INVESTMENT REQUIREMENT

New Project

There is no threshold or limiting investment amount for a new abatement project with the exception of warehousing activity projects and projects owned by utilities producing electricity.

  • Warehousing activity projects must have capital costs of at least:
    • $1,000,000 for projects located in favored geographic areas (as defined in Section 40-18-190(a)(6), Code of Alabama 1975);
    • $5,000,000 for projects not located in favored geographic areas;
  • Projects owned by utilities which produce electricity from alternative energy resources must have capital costs of at least $100,000,000;
  • Projects which produce electricity from hydropower production must have capital costs of at least $5,000,000.

Major Addition

The additional capital investment by an industry that is expanding their current facilities in Alabama must be at least:

  • 30% of the original cost of the currently existing industrial property (sum total of the original facilities and equipment and any expansions and additions prior to the current addition), or
  • $2,000,000

BROWNFIELD DEVELOPMENT TAX ABATEMENTS

SUMMARY

The Brownfield Development Tax Abatement Act (Chapter 9C, Title 40, Code of Alabama 1975) gives cities and counties the ability to abate the following:

  • Non-educational city and county sales and use taxes;
  • Non-educational state, city and county property taxes – up to 20 years;
  • Mortgage and recording taxes.

To receive an abatement for any or all of these taxes, a business must meet certain qualifications and follow certain procedures, as determined by law and regulation.

STATUTORY REQUIREMENTS FOR BROWNFIELD ABATEMENTS

The property must be in the Alabama Department of Environmental Management's voluntary cleanup program to qualify for Brownfield abatements.

CAPITAL INVESTMENT REQUIREMENT

New Company

There is no threshold or limiting investment amount for new Brownfield abatement project. The total amount of the capital investment by a company that is locating in Alabama is eligible for the tax abatements.

Major Addition

The additional capital investment by a company that is expanding their current facilities on Brownfield development property must equal the lesser of: 30 percent of the original cost of the property as remediated or $2,000,000.

CONTACT US:

Questions regarding tax abatements should be directed to:

Angela Till, Abatement Program Administrator
Office of the Commissioner
Alabama Department of Revenue
P.O. Box 327001
Montgomery, AL 36132-7001
Telephone: 334-242-1192
email: angela.till@revenue.alabama.gov